Business Description

13 History and Organization 13 Electric Utilities 13 Gas Utilities 16 Utility Regulation Characteristics 18 Environmental Matters 21 Human Capital Resources 22 ITEM 1A. RISK FACTORS 24 ITEM 1B. UNRESOLVED STAFF COMMENTS 38 ITEM 1C. CYBERSECURITY 38 ITEM 2. PROPERTIES 39 ITEM 3. LEGAL PROCEEDINGS 39 ITEM 4. MINE SAFETY DISCLOSURES 39 INFORMATION ABOUT OUR EXECUTIVE OFFICERS 40 Part II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 41 ITEM 6. RESERVED 42 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 42 Executive Summary 42 Recent Developments 43 Results of Operations - Consolidated Summary and Overview 44 Non-GAAP Financial Measure 45 Electric Utilities 46 Gas Utilities 49 Corporate and Other 50 Consolidated Interest Expense, Other Income (Expense) and Income Tax Benefit (Expense) 50 Liquidity and Capital Resources 51 Cash Flow Activities 52 Capital Resources 53 Credit Ratings 54 Capital Requirements 55 Critical Accounting Estimates 57 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 59 2 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 61 Management’s Report on Internal Controls Over Financial Reporting 61 Reports of Independent Registered Public Accounting Firm 62 Consolidated Statements of Income 65 Consolidated Statements of Comprehensive Income 66 Consolidated Balance Sheets 67 Consolidated Statements of Cash Flows 69 Consolidated Statements of Equity 70 Notes to Consolidated Financial Statements 71 Note 1. Business Description and Significant Accounting Policies 71 Note 2. Regulatory Matters 80 Note 3. Commitments, Contingencies and Guarantees 82 Note 4. Revenue 85 Note 5. Property, Plant and Equipment 86 Note 6. Jointly Owned Facilities 87 Note 7. Asset Retirement Obligations 88 Note 8. Financing 88 Note 9. Risk Management and Derivatives 92 Note 10. Fair Value Measurements 95 Note 11. Other Comprehensive Income 97 Note 12. Variable Interest Entities 98 Note 13. Employee Benefit Plans 99 Note 14. Share-based Compensation Plans 104 Note 15. Income Taxes 106 Note 16. Business Segment Information 109 Note 17. Pending Merger with NorthWestern 111 Note 18. Subsequent Events 112 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 113 ITEM 9A. CONTROLS AND PROCEDURES 113 ITEM 9B. OTHER INFORMATION 113 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 113 Part III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 113 ITEM 11. EXECUTIVE COMPENSATION 113 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 114 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 114 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 114 Part IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 115 ITEM 16. FORM 10-K SUMMARY 118 SIGNATURES 119 3 Table of Contents GLOSSARY OF TERMS AND ABBREVIATIONS The following terms and abbreviations appear in the text of this report and have the definitions described below: AC Alternating Current AFUDC Allowance for Funds Used During Construction AI Artificial Intelligence AOCI Accumulated Other Comprehensive Income (Loss) APSC Arkansas Public Service Commission Arkansas Gas Black Hills Energy Arkansas, Inc., an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Arkansas (doing business as Black Hills Energy). ARO Asset Retirement Obligation ASC Accounting Standards Codification ASU Accounting Standards Update as issued by the FASB ATM At-the-market equity offering program Availability The availability factor of a power plant is the percentage of the time that it is available to provide energy. BHC Black Hills Corporation; the Company BHSC Black Hills Service Company, LLC, a direct, wholly-owned subsidiary of Black Hills Corporation (doing business as Black Hills Energy) Black-box Settlement Settlement with a utility’s commission where the revenue requirement is agreed upon, but the specific adjustments used by each party to arrive at the amount are not specified in public rate orders.…